Financial Planning for a New Year

It's a new year. Wipe the slate of the past clean and plan for the future. Here's my plan:

1. I will save 6 months of what my monthly expenses are in case of emergency: $18,000 (via 401k savings that i verified that I can borrow against, anytime). I will accomplish this by December 31, 2011.
2. I have budgeted for one beach vacation to Ocean City, NJ: $2,000: (See Formulas post) x/y=z, in other words, $2,000 / 6 = $334 per month. $167 per paycheck
3. I want to save for random weekend family ski trips: $1,000: x/y=z, 1000/2=$500.
4. I want to travel to my parents house for fun: $500, x/y=z, 500/12= $42
5. Fly family to MN for family reunion: $2,000 x/y=z or $2,000/7= $286
6. Fly family to MN for Christmas party: $2,000 x/y=z or $2,000/7= $286
7. Movie night with Terri: $1500, x/y=z, $1,500/12= $125

the next thing to do is add all this up. (the financial plan starts with, not how much money I do or don't have, but with what I want to do) The next step is to plan a way to make more money, if your plan exceeds your current known income.

k = known income. more to come....

Why The Secret Doesn't Work

I watched The Secret DVD. I've listened to the audio version of it. I did this over and over for years. I am big believer in quantum theory and the principles of mind over matter; BUT for me, The Secret never took effect. As a matter of fact, it created an opposite effect and sent me spiraling down hill in both my personal and profession life.

The more I listened to The Secret the worse my situation became. After 2 - 3 years of trying to make it work i finally gave up on it and had eventually forgotten about it. Looking back, the reasons why The Secret didn't work for me are finally clear.

First, the number one reason why The Secret didn't work for me is because I put myself in the mindset that I was already successful. I totally believed it. I acted like it. I spent money like it. I even talked like it. I recently realized this was the key to my downfall. I relaxed because part of my vision of success was to sip on Pina Colada's and let other people do the work for me. Big oops!

Next, I, 100% without a doubt, followed the positive thought process, but looking back, the though process is only that, a thought. No where did The Secret invoke action. I kept hearing, "if it was meant to be, it will happen". I misinterpreted what The Secret was saying as "wait around" and it will come.

Next, when you listen to The Secret, don't you think that some of the subjects were a little crazy? To me there was at least two subjects (the people the secret was based on) that were just complete nut jobs. Subconsciously, I found it hard to take them seriously and caused doubt to their validity in my subconscious. I spent years thinking that i looked past it, but in reflection, they stood out as barriers to my success. I'd rather be broke and homeless and real, rather than rich and kooky. One of speakers had been involved in an incident where his business practices were blamed for the cause of death of two of his clients. Thankfully he wasn't at fault but his practices are definitely questionable.

Moving along, I believe in the energy of positive thoughts and frequency, but i also came to the conclusion that the human body doesn't have enough electricity to produce enough power of frequency needed to travel across the universe. In The Secret, the frequency is often compared to radio and television waves. Even radio waves fade at some point, why do they think that human frequency would be any more powerful? I believe that the frequency of our thoughts only travels a few feet from our body. (This is an interesting topic to look up. In college I studied human proximity. Maybe it has something to do with our frequency?)

Lastly, i became so focused on how much i wanted The Secret to work, it became a distraction and took away from what I really needed to do. I would listen to The Secret by taking extra long walks/runs in the late morning, lunch or early afternoons - at critical times when i needed to be on the phone, or giving my employees direction. This was a mistake - a huge mistake. I did this for years! I need to be in the office, carrying out and executing our clear goals. In The Secret years, I had clear goals and a clear vision, but no clear timeline and no execution.

So, how did i make the principles of The Secret work? First, I reflected on what was working and what wasn't. Once I took a hard look, most of what I was doing had not been working. Most of my habits had never worked! The only thing that really worked was when I carried out a vision, rather than worked to create one . Hopefully you know what I mean by the previous sentence. If you have a vision for something you will know what I am talking about.


Anyway, Instead of relying on hocus pocus for success, I studied the truly successful and what they physically did to make them successful. The common trait was how consistent they were at executive each task necessary to get through each step of success. The common traits are hard work, focus and frugality. Yes - I said frugality. The most common trait of every successful person I know is that they are perceived to be cheap bastards. People hate them. On the flip side, my mentors were fun, spendy and well liked.

Interestingly enough, with the crash of 2008, my mentors are either in jail, or out of business. I am talking to some big time shysters that either were busted for forging 8 figure loan documents to being arrested for running some of the largest ponzi schemes in the country. No kidding! I realized I had the wrong role models in business. I look back to the major growth period of my business and we we had it all. Luxury cars, Parties wherever we went, $2,500+ bar tabs, first class upgrades and attention - lots of attention. Thankfully i never went their route. I never opened million dollar credit lines and trusted an accrual based accounting system.

Things have changed. We fly using discount airlines, if at all, we pack lunches and don't open bar tabs. Life is balanced. It will be hard not fall back into that lifestyle but with the way things are we will never touch it - it just doesn't exist anymore.

Anyway, the moment i decided to "do" things rather than wait for "the universe to happen" things became positive for me. I love The Secret and what it represents, but I wish I would have remained objective from the beginning.

When Bankers Speak - RUN!!!

When you see TV commercials or literature from a bank, financial planner, financial institution, credit card company or insurance company, run as fast as you can. DO NOT FALL FOR THEIR PITCH.

Their angle is to make you feel bad about what you are NOT doing so that you will do what they say. They tell you to do all of the things they want. But in reality the intent is to make them money. This is ok. they are a business and the intent of business is to make money. This is why you need to be educated, whether you want to take the time to do it or not.

They will present scenarios that will work for you if you fit inside of their box. The bottom line is that whatever they try to set you up with is in their best interest, not yours.

If you don't remember anything I say, remember this: you need to get educated on how to manage your money. Most people won't take the time or don't know where to start, or worse, don't know what they don't know. I've created a shortcut for you. See the post called "How to Move your Money".

How to Move your Money: for people with 0 - $2,000 cash

Ok, you've read my post about how to make money. Now you have to "move your money". Move it? What does that mean?

Well, we all hate to save money. It's ridiculous that we struggle to save, but as referenced in my "run" posting, credit card companies, auto dealers and even cable tv and internet service providers make you feel stupid if you don't have an account with them. Don't listen to them. Do this. (This is intended for people with 0 - $99k in savings. If you have savings of $100,000 or more, jump to that section.)

• Here's an outline of the steps you will need to take:
  You need a self directed IRA. I won't refer you to any particular business, so google, "self directed IRA" (include the quotes) and look for a side by side comparison of which company to set up an account. Examples include Etrade, TDAmeritrade, Schwab, etc. They all have small print so please use a non biased web site for your comparison.
• Next, you will need a savings account. Open one at your bank. Choose the one with no fees. It's better to have a no fee account than a fee based account that pays interest. Today's interest rates are laughable.
• There are two types of savings plans you will set up: Retirement and Investment accounts.

Know this:

• If you have a job with a 401k, invest up to the amount your company matches. for example, if your company matches 100% up to 5% of your contribution, then just do that.
• Next, open a retirement account at an independent financial institution. Contribute the maximum allowed. YOU NEED TO DO THIS! If you don't you might as well stop reading this information.
• Deposit the maximum allowed amount of money into your retirement account.
• at least 10% of it and ideally 25%. I am talking after tax money. For example, if your paycheck is $500, you have to move $50 to $125 of it to a savings account.
• When you get

Important Formulas

From time to time I may refer to formulas. Instead of burying formulas into my posts, i thought I'd just provide a central place form them.

Definition of "Rich" formula:


Residual income formula:


Income Source formula:


Goal Setting Formula:


Savings Formula: x /y = z

x = total cost of expenditure
y = how many months you have to save before the spending takes place
z = required savings per month

Count by hundreds, not by hundredths

How much time do you spend balancing the check book? If you are like me, it's never. I was taught to balance a check book down to the penny. I was taught to track EVERYTHING. This countered what my gut was saying. Why?

It takes a lot of time to track every penny. If you weigh the amount of time you spend counting pennies vs the price of your time by the hour, you are wasting your time and money. You could be doing something more productive - like relaxing.

I've adopted a routine to counting money by the hundreds. If I have $99 in my pocket, it's like change. It's amazing how this habit alone can change your perception of money. If you treat $100 like it's $1 and $1,000 like it's $100, all the sudden, $1 million doesn't feel like a lot of money. It's a neat phsychological trick.

This habit may seem like it contradicts my post about being frugal so I will clarify. Being frugal is different than penny counting. You should do your best to limit your expenses (everyone's perception of what frugal is may be different) but don't waste your time counting pennies. Besides, pennies may not even exist anymore in the near future.

I want to enjoy life. Why do I have to be frugal to be rich?

So you think having material posessions means enjoying life. I can say from first hand experience, life is much better with just a roof over my head, a chair, desk and computer. Things such as cable tv, fancy cars, fancy houses and all the greatest toys only end up becoming distractions. Don't get me wrong, there is nothing better than watching my favorite TV show, waterskiing and heading to the beach in Miami in the middle of a noreaster, but i found it to be better to rent the items at the time i want to use them rather than owning and maintaining them. Thats just me. It took practically being homeless and having to sell everything I own to figure this out. You have to decide what's best for you.

If you truly get rich, you should focus your efforts on helping people whether through mentoring, coaching or leading by example.

How to Stay Rich

There are several ways to stay rich. first, live within your means. Be frugal.

Don't get me wrong, enjoy life for we coudl die as early as tomorrow, but get rid of anything that has a monthly payment. Yep, that includes car payments, house payments and even cable tv, gas and electric payments. Getting rid of utility bills may be unrealistic so do what you can to keep the monthly payments low.

First Things First

So you want to get rich? It's easy. It just takes time, planning and discipline. Here's how.

The first thing you have to do is set a goal. Is $1 million dollars in the bank considered being rich to you? What about $100,000, $10 million, or even a $1 billion.

To me, being rich means to be able to live off of my residual income. For example, if my total monthly expenses are $5,000 and I generate $5,000 in residual income, then by my own personal definition, I am rich.

If you work the formula backwards (see "Formula for Getting Rich" blog) you will see it takes millions of dollars in the bank to build a $5,000 per month residual. Getting rich is one thing. Staying rich is another. This is why many people who win the lottery lose it and end up where they were before they hit the jackpot.

Different ways to stay rich?

• invest cash into dividend producing stocks
• focus on one multilevel marketing company and build residuals via your downline
• buy real estate and generate rents
• Create a subscription based business (for example, run a member driven web site where people have to pay monthly or annual fees).
• Sell commodity based products where the sales become automatic, they include upsells and reorders.

The point is to pick two things and do it. Why two? you will need a job with a steady paycheck to guarrantee that your bills are going to be paid.

Financial Tip for the day

Do what you love, the money will come.